Deadbeat renters - options?

Question

How do forum members handle renters who stop paying rent? Do you evict right away? Do you submit their delinquent rent to the credit bureaus and hit their credit score? Do you offer a write off for keys? Do you try to negotiate a payment plan? Curious what people are doing in the "hopefully" post-Covid environment.

Lynnette E. · Answer

I invest in a rural community.  I do not do cash for keys.  If I would do it, then every tenant would expect it.

I talk with the tenants and see what is going on, why they do not have their rent.  During COVID I had tenants who were in the hospital, had the state close their job, etc.  We worked together and came up with an agreement.  Some were 3 weeks late,  all but one eventually paid.

And he did not pay because he had a new drug dealer girlfriend and got in to drugs.  He got a 30 day notice to leave for dealing drugs and 14 day notice for non-payment.  I did both because I was not so sure the courts would go with the non-payment.  I also told the local police what was going on, the times they were open for sales, the vehicles and how they were doing the sells and that they had two eviction notices.  The police visited the area a lot in the 2 days after that and my tenant decided to leave before the police found him a new home.  I did lost two months rent on him as I was trying to work with him the first month.

Taylor L. · Answer

All compliant with state and local laws. Typically it's rent due on the 1st, late on the 5th (or something like it), and eviction is filed based on state and local laws. That's the benefit of using property managers, though. They're focused on the day to day, we focus on managing them and making sure the property continues to function as expected.

We are very hesitant to do cash for keys, because if word gets around to your other tenants that that's an option, you're in trouble. It's a valid strategy, but must be done very carefully or it can completely blow up in your face.

Through covid we have worked with many tenants to get them on payment plans and/or get aid. Some of them have received substantial assistance, but that is only if they were willing to work with us so we could help with the application. Unfortunately not all were willing to work with our PM and were unresponsive. Most people have just fallen on hard times. Fortunately we have some very awesome people in the offices who build relationships with tenants. Dig the well before you're thirsty.

Lynnette E. · Answer

For me this is dependent on the situation.  The tenant that owes me two month's rent I wrote it off.  First, the job he has had for 11 years is lawn moving, changing out outside holiday decorations, landscaping.  He makes $10 / hr paid by the company, OT during Christmas and Summer.  I would never be able to collect from him, even a court would not take part of his salary because his income is low.  He is paid in cash, signs a receipt.  Has no bank.  Low IQ as well.  He will not be moving up in the working world, he is at his level of functioning.  Filing in court would just cost me more, and I still would not have a way to collect.

If the tenant has a very good job, I would go to court and get a judgement, then find something of his/hers that I can seize, like a second vehicle, or garnish wages. ... Unless the person had a real reason for not paying like lost spouse or job, and they were polite, then I would try to work out something that is reasonable.

Example, my parents rented to a family where the mother was stay at home with the kid.  Father worked as a butcher for a grocery store in southern CA.  The pay was good.  The butchers settled their contract, they did not want to strike.  But the cashiers did not settle on their contract and did strike.  The butchers did not get strike benefits because they were not striking, but they did not get paid because they did not work as they could not walk across the strike line.  The strike lasted 3 to 4 months.

The agreement was that one month after he went back to work he would pay 25% extra on the rent until he was caught up.  Waiting a month was because he would be behind in all his bills.  But after he put in the extra 25% the first month, my parents wrote them a letter cancelling the rest of the rent owed.  We also dropped off food and Christmas things for them on Sunday mornings when we knew they were in church, but never told them, ever.  They were renters for 39 years, when my parents had passed and we had to sell the house.  In 39 years, my parents lost 4 months rent--never a turn over!  That is a win-win agreement.  They showed they would pay, and they did, and my parents forgave the debt so they could start getting their life back to normal.  My parents came out fine in the end, no turn over!

Michael Robbins · Answer

@Dawn Irion the proper way to handle renters not paying rent is to follow the lease contract and State laws.  I would recommend not deviating from how the lease and the State laws read.

Dena Puliatti · Answer

Great advice on this one.  Cash for keys works if the tenant will communicate and truly doesn't have the rent.  Make sure everything is in writing, and have the tenant sign off.  Change the locks immediately.

As far as collecting rent owed, you are really throwing good money after bad.  I have done the collection agency thing, but I've never seen it actually work.  If you want it on the credit report, you can sue for possession and money.  Normally, evictions are just for possession of the property.  After you win that, you can sue for the money.  However, winning a judgment for the money and actually getting the money are 2 very different things...The only gain you would get is basically revenge on the credit report to serve as a warning for future landlords.

Dawn Irion · Answer

Thanks for the responses - my rentals are spread out geographically so cash for keys might be an option but I get not wanting to do that if tenants are likely to communicate.

What about evicted tenants who still owe a lot in back rent? Do you write it off, take it to a collection agency, credit report the balance owed?

John Teachout · Answer

We find out why they haven't paid the rent but often they go dark if they don't have the money. We then file a pay or quit notice. We post one on the door and put one in the usps mail. We usually use a 3 day notice. ie, they have three days from the date the notice was posted or whatever other date you state in the notice. We sometimes give a couple extra days if it's over a holiday or weekend. That usually opens a line of communication but if it doesn't, then you file with the courthouse in the county (or other jurisdiction you're in) for unlawful detainer. (you asked them to leave and they didn't) They'll get served a notice by the court (constable, sheriff's office, etc) and then have so many days to file an answer prior to the court date. In court they have to tell the judge why they didn't pay the rent. Usually the judge will inquire whether you've tried to work something out with the delinquent tenant. Here in Georgia, it's fairly simple in they either paid the rent or they didn't pay the rent. They're given a date to be out of the property and if for some reason they don't leave by then, then a writ is issued which is when they are "forced out" by law enforcement. This is a worst case scenario because the landlord has to hire a crew to do the clean out and everything has to be removed out of the property within a short amount of time. Once it's out of the property and put on the curb or property edge, the govt or landlord has no responsibility to conserve or protect the property. Change the locks and get out your cleaning supplies and sheetrock mud...

Now all of this is state and even city specific so be sure to follow your local procedures exactly.

Scott M. · Answer

What to do right away?  Try and talk to them to get a sense of what is going on.  If they don't communicate with you then file a notice (7 day, 10day, 30 day, whatever you state allows).  Just because you file doesn't mean you are going to evict but it puts a clock on the tenant to stop doing what they are doing (not paying, not communicating) and if they don't do either at the end of that period then start eviction.

Gail K. · Answer

What is their reason for ceasing to pay rent? Job loss, illness or just decided no one else is paying it either.

Gail

Deadbeat renters - options?

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